Basic Microeconomics and Economic Reasoning

Vocabulary-style flashcards covering the basic principles of microeconomics, including market forces, marginal analysis, and various economic definitions from the lecture notes.

Economy

The state of a country in terms of the production and consumption of goods, services and supply of money; the structure or conditions of economic life in a country.

Economics

The study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.

Coordination

A key word in the definition of economics that refers to how the three central problems facing any economy are solved.

Three central problems

1. What, and how much, to produce.

2. How to produce it.

3. For whom to produce it.

Trade offs

The things that we need to give up when making choices, consisting of all the options and alternatives offered.

Resource

Anything used to produce goods and services, including land, labor, and capital.

Scarcity

A condition where available goods are too few to satisfy individuals' desires; it is constantly changing and based on two elements: wants and the means of fulfilling them.

Demand

The quantity of a good or service that consumers are willing and able to buy at different prices during a given period of time.

Opportunity

The most desirable alternative that was given up, or the benefit that might have been gained from choosing the next-best alternative.

MICROECONOMIC

The study of how individual consumers, households, and businesses make decisions about buying, selling, and using resources, focusing on specific markets and prices.

MACROECONOMICS

The study of the economy as a whole, examining broad economic issues that affect an entire country or region.

MARGINAL COSTS

The additional cost over and above the costs already incurred, representing the change in total production cost from producing one additional unit.

MARGINAL BENEFITS

The additional benefit or added satisfaction (utility) a consumer derives from an additional unit of a good or service beyond what has already been derived.

MARKET FORCES

An economic force given relatively free rein by society to work through the market, rationing by changing prices (prices go up during shortages and down during surpluses).

INVISIBLE HAND

The price mechanism, specifically the rise and fall of prices that guides actions in a market.

ECONOMIC FORCES

Factors that influence how an economy operates and affect the decisions of consumers, businesses, and governments.

SOCIAL FORCES

Forces that guide individual actions even though those actions may not be in an individual's selfish interest.

POLITICAL FORCES

Government actions, laws, policies, and political conditions that influence businesses, the economy, and society.

Economic Model

A framework that places the generalized insights of the theory in a more specific contextual setting.

Economic Principle

A commonly held economic insight stated as a law or principle.

Economic Policies

The actions and strategies that a government uses to influence the economy.

Positive Economics / Empirical Facts

The study of what is and how the economy works, based on economic facts and relationships from objective evidence.

Normative economics

The study of what the goals of the economy should be, often integrated with positive economics to decide on policy.

Art Of Economics / Political economy

A branch of economics that relates positive economics to normative economics.